Top 10 conglomerates agree to implement the non-binding guidelines from April


The nation’s antitrust watchdog announced Thursday a set of new guidelines for top-tier companies to share more business opportunities with smaller firms through competitive bidding and fair contracts.

According to the Fair Trade Commission and company officials, the nation’s top 10 groups have already agreed to refrain from in-house transactions starting in April even though the new regulations are not legally binding. 

Following an agreement made in January among the big four conglomerates of Samsung, Hyundai Motor Group, SK and LG, another six groups ― Lotte, Hyundai Heavy Industries, GS, Hanjin, Hanhwa and Doosan ― also decided to join the initiative on Thursday.

Under the FTC’s recommendations, companies are advised to not offer their affiliates special favors, to open bidding to independent firms and to secure transparency in selecting business partners.

The new measures will be implemented first into the sectors of system integration, advertising, logistics and construction where, the FTC found, inter-subsidiary trading made up 71 percent of the deals at the nation’s top 20 companies last year.

Of them, 88 percent were private contracts made without competitive bidding.

“The top 10 groups saw 18 trillion won ($16 billion) in sales through in-house trading in those sectors. Now they need to open the opportunity to smaller firms,” said FTC chief Kim Dong-soo after a meeting with representatives of six conglomerates on Thursday.

“Company officials also fully understood that the entry barrier is too high for smaller firms to grab a business opportunity with top groups. They agreed to carry out open competitions when it comes to large-scale projects worth more than 5 billion won.”

Kim, who has been holding a series of meetings with company officials in recent months, said he would not meet them individually any longer and focus more on whether the new guidelines are properly carried out voluntarily.

Industry watchers, however, still expressed doubts about the effectiveness of the non-binding agreement in eradicating the long-running practice of internal trading across industries.

“It’s true there is no punitive measure. But we have had discussions with top companies that lead the economy. I believe they will play a leading role and we will continue monitoring them,” Kim said.

Under the new guidelines, companies are also advised to operate their own supervisory committees to secure transparency in their inter-subsidiary trading and contracts with other companies.

They, however, are allowed to make exceptions in some cases, such as when a project is closely related to their business secrets or when competitive bidding lowers productivity or effectiveness of the project.

Those who attended the Thursday meeting with the FTC chief were Lotte vice president Lee In-won, Hyundai Heavy Industries president Choi Won-gil, GS vice president Seo Kyung-seok, Hanjin CEO Seo Yong-won, Hanhwa vice president Shin Eun-cheol and Doosan vice president Lee Jae-kyoung.

By Lee Ji-yoon (jylee@heraldcorp.com)